COMPANY RESEARCH | Initiation

June 26, 2014

Overseas Education Ltd

(OEL SP)

Share Price: SGD0.95

MCap (USD): 297M

Singapore

Target Price: SGD1.40(+47%)

ADTV (USD): 0.2M

Consumer Disc.

From tortoise to hare; BUY   

(New)

Key Data

Initiate with BUY and DCF-based TP of SGD1.40. Stock overhang eliminated post-bond issue, paving the way for further re-rating. Growth constraints a thing of the past with the new campus coming on-stream next August. EPS growth to accelerate to 15%/17% in FY15E/16E from 7% in FY14E. Catalysts: Higher-than-expected hikes in tuition fee and regional expansion. Risks: Competition and rising staff costs.

Entering into a strong growth trajectory The successful raising of the final SGD150m cash to build its new SGD271m campus has eliminated the overhang on the stock which once faced severe growth constraints. With this issue now behind them, Overseas Education Ltd (OEL) – an international school operator - will embark on a stronger earnings growth trajectory of 16.1% over FY14E-16E (+13.6% CAGR in FY09-13). At 16x FY14E P/E, OEL is attractively priced vs sector peers’ 27.5x. Our DCF-based TP of SGD1.40 (5.5% WACC, 1% Tg) provides a strong 47% upside.

Why we like OEL

1.03/0.69

52w high/low (SGD)

0.2

3m avg turnover (USDm)

30.1

Free float (%)

390

Issued shares (m)

SGD370.8M

Market capitalization Major shareholders: -PERRY DAVID ALAN

34.7%

-WONG LOK HIONG

33.3%

-Eastspring Investments (Singapore) Ltd.

7.5%

Share Price Performance 1.05

180

1.00

170

0.95

160

0.90

150

0.85

140

0.80

130

0.75

120

0.70

110

0.65

100

0.60

90

0.55 Feb-13

May-13

Aug-13

Nov-13

Feb-14

May-14

80

Overseas Education Ltd - (LHS, SGD)

Deep-pocketed clientele. By targeting the children of high-income foreign professionals in Singapore, OEL commands strong pricing power at a time when demand still outstrips supply. Tighter immigration policies should not have any impact on its business. Demand outpaces supply = pricing power. As the new campus commences next August, we expect OEL to close the 15% gap between its tuition fees and competitors’. The competitive dynamics are expected to stay favourable: 8% pa demand growth for school places vs less than 4% pa supply growth until 2015/16. No more growth constraints. While growth in recent years was decent, it was hampered by space constraints at its old campus. This is set to change as the new campus increases its capacity by 22% and allows OEL to hike its tuition fees by 5.5% pa in FY15E-16E and 3-4% pa thereafter, based on our estimates. FYE Dec (SGD m) Revenue EBITDA Core net profit Core EPS (cts) Core EPS growth (%) Net DPS (cts) Core P/E (x) P/BV (x) Net dividend yield (%) ROAE (%) ROAA (%) EV/EBITDA (x) Net debt/equity (%)

BUY

FY12A 96.0 28.4 20.7 7.8 6.1 4.3 12.2 3.7 4.5 33.8 19.1 na net cash

FY13A 102.5 30.8 22.6 5.7 (27.0) 2.9 16.7 2.6 3.0 21.1 14.6 6.6 net cash

FY14E 107.2 32.7 24.2 6.1 7.1 3.0 15.6 2.4 3.2 15.9 8.8 10.6 net cash

FY15E 121.4 44.7 28.0 7.0 15.5 3.5 13.5 2.2 3.7 16.9 7.7 10.1 42.4

FY16E 138.2 59.0 32.6 8.2 16.6 4.1 11.6 2.0 4.3 18.0 8.6 7.2 25.2

SEE PAGE 24 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Overseas Education Ltd / Straits Times Index - (RHS, %)

1 Mth 3 Mth 12 Mth Absolute(%)

(2.1)

15.2

39.7

Relative to index (%)

(1.6)

9.6

32.4

Maybank vs Market Positive Market Recs

Neutral Negative

2

0

0

Maybank Consensus

% +/-

1.40

1.03

35.9

'14 PATMI (SGDm)

Target Price (SGD)

24

25

(4.7)

'15 PATMI (SGDm)

28

29

(2.2)

Source: FactSet; Maybank

Gregory Yap (65) 6432 1450 [email protected] Truong Thanh Hang (65) 6432 1451 [email protected]

Co. Reg No: 198700034E

MICA (P) : 099/03/2012

Overseas Education Ltd

Investment thesis Initiate with BUY and SGD1.40 TP Overseas Education Ltd (OEL) is a Foreign System School (aka FSS or international school) catering to the three to 18-year-old children of expatriates and/or foreign parents in Singapore. We like its pricing power that taps into the higher consumption capacity of the expatriate and wellto-do foreigner communities. The scheduled expansion of student capacity will allow OEL to grow faster from next year onwards. We think OEL is undervalued at 15.5x FY14E P/E and 13.4x FY15E P/E, which compares favourably with the respective 27.5x and 19.3x P/E multiples for its peers. Our DCF-derived TP of SGD1.40 implies 23.0x FY14E P/E and 20.0x FY15E P/E.

Construction of new campus well underway Total capex required for the new campus in Pasir Ris is estimated at SGD271m. Up until the recent SGD150m bond issue, OEL was short of some SGD140-150m. The April bond issue has helped to bridge the funding shortfall, removing the overhang on the stock. OEL management is confident that it will be able to successfully complete the construction by April next year, and investors are able to track the progress at https://www.ofs.edu.sg/new-campus/.

New school campus to drive growth from 2015 The new campus replaces the current Paterson Road campus that will make way for the Orchard Boulevard MRT station. It will add 860 places to its current capacity of 3,940 students. Come next August, it will open for business, in time for the 2015-16 academic year. The capacity expansion, along with an expected increase in tuition fees, will augment the growth profile of OEL. We forecast EPS to accelerate to 15.5%/16.6% in FY15E/16E from 7.1% in FY14E.

Tuition fees to rise following opening of new campus Due to capacity constraints and older facilities at the old campus, OEL’s tuition fees are still some 15% below market rates even after a significant 8.5% increase in 2013. We expect the new facilities and expanded student capacity to drive a 5.5% pa increase in tuition fees over FY15E-16E, and 34% pa thereafter.

Strong demand for international schools in Singapore By our estimates, the total number of international school students in Singapore is expected to grow by 8% CAGR in 2014E-16E from 40,000 currently, while the number of seats is only expected to increase by only 3.7%, suggesting a shortfall of 1,600 seats in FY14E and 3,200 in FY15E. The FSS is a vital part of Singapore’s economic infrastructure, as expatriate families keen on providing their children with an excellent education would view FSS as a k ey condition in deciding to relocate to Singapore.

June 26, 2014

2

Overseas Education Ltd

Investment thesis in charts Figure 1: Stronger revenue growth expected over FY15E-16E

Figure 2: Stronger earnings growth expected over FY15E-16E

Source: Company, Maybank KE

Source: Company, Maybank KE

Figure 3: Growing student enrolments over FY15E-16E

Figure 4: Room for tuition fees to rise

Driven by tuition fee hikes and growing new student enrolments as the new campus comes on-stream

We forecast a 7%/8% rise in student population in FY15E/16E, on an enlarged campus capacity starting from Aug 2015 (%) 5,000 4,363

4,500 4,000

3,554

3,597

3,680

3,776

3,776

3,776

4,581

4,673

4,720

4,040 8.0

2,500 2,000 2.3

1,500 1,000

2.6 2.0

1.2

1.0

8

45,000 35,000

4

20,000

3

15,000

2

10,000

0

0

8.0

7.2

7.0

5.7 5.0

30,000 25,000

1

(%) 9.0

8.0

40,000

5

500

Student enrolment

(SGD/year) 50,000

6

5.0

3,000

The new campus restores the pricing power of OEL, allowing it to raise tuition fees by 5.5% pa the next two years

9

7

7.0

3,500

Driven by stronger revenue growth that outpaces growth in overhead expenses

5.5

5.5

6.0 4.0

4.0

4.0

4.0

4.0

4.0

4.0

3.0 3.0

3.0

2.0

5,000

1.0

0

0.0

Senior school fees

YoY growth (RHS)

YoY growth (RHS)

Source: Company, Maybank KE

Source: Company, Maybank KE

Figure 5: Revenue growth expected to outweigh staff costs

Figure 6: Higher revenue to compensate for rising costs

Revenue expected to grow faster than staff costs in FY15E-16E on improving economies of scale (SGD m) 180.0

(%) 25

160.0 20

140.0

Higher depreciation and interest cost being compensated by the cessation of rental cost for the old campus (as % of revenue) 60.0

(as % of revenue) 9.0 8.0

50.0

7.0

40.0

120.0

6.0

15

100.0

5.0

30.0

80.0

10

60.0 40.0

5

20.0 0.0

0

Staff cost YoY growth in staff cost (RHS)

Source: Company, Maybank KE

June 26, 2014

Revenue YoY growth in revenue (RHS)

5.0

4.0

20.0

3.0 2.0

10.0

1.0

0.0

0.0

Personnel expenses

School lease rental (RHS)

Depreciation expenses (RHS)

Interest expenses (RHS)

Source: Company, Maybank KE

3

Overseas Education Ltd

Valuation & target price OEL’s share price has risen 14.5% YTD in 2014, lifted by the announcement of the bond issue which was to finance the new school campus, as investors reduced their risk premium for OEL. Prior to this, the financing of the new campus at Pasir Ris had been a major stock overhang as OEL has move out of its existing campus at Paterson Road by Jun 2015. Our DCFbased valuation yields a SGD1.40 TP. A comparison to its education-related peers around the world suggests that OEL is still undervalued. The stock trades at 15.5x FY14E P/E against the industry average of 27.5x. Our forecasted EPS CAGR from FY14E to FY19E is 10.8%, in which we have high confidence given its high earnings quality. This is a st eady, stable business that we think is undervalued at 15.6x FY14E P/E and 13.9x FY15E P/E, below its peer average of 27.5x and 19.3x earnings. At our TP, the stock is priced at an implied 23.0x FY14E P/E and 20.0x FY15E P/E. Initiate coverage on OEL with a BUY recommendation. Figure 7: Discounted cash flow valuation FYE Dec (SGD m) EBIT Less: Tax Less: Interest Add: D&A

2014E

2015E

2016E

2017E

2018E

2019E

2020E

2021E

2022E

2023E

29.2

33.7

39.3

43.5

45.3

48.8

51.8

53.0

54.3

56.1

(5.0)

(5.7)

(6.7)

(7.4)

(7.7)

(8.3)

(8.8)

(9.0)

(9.2)

(9.5)

0.0

(3.3)

(7.8)

(7.8)

(7.8)

(2.6)

0.0

0.0

0.0

0.0

3.9

8.3

12.5

12.6

12.7

12.8

12.9

13.0

13.1

13.2

(110.0)

(130.0)

(5.0)

(5.0)

(5.0)

(5.0)

(5.0)

(5.0)

(5.0)

(5.0)

Less: Working Capital

(1.1)

(0.5)

(0.5)

(0.2)

(0.3)

(0.4)

(1.4)

(1.4)

(1.5)

(1.5)

Add: net borrowings

150.0

0.0

0.0

0.0

0.0

(150.0)

0.0

0.0

0.0

0.0

67.1

(97.5)

31.8

35.6

37.2

(104.7)

49.5

50.6

51.7

53.3

67.1

(92.4)

28.5

30.3

30.0

(80.1)

35.9

34.8

33.7

33.0

Less: Capex

FREE CASH FLOW PV of free cash flow Total PV of free cash flow Terminal value PV of terminal value

120.9 741.5 434.5

Equity value

555.4

Outstanding shares

397.8

Intrinsic value/share

1.40

Assumptions: Risk free rate

2.5%

Market risk premium

5.5%

Beta

0.66

Cost of equity

6.1%

Cost of debt

6.0%

Tax rate

17.0%

E

44.3%

D

55.7%

WACC

5.5%

Terminal growth rate

1.0%

Source: Maybank KE

June 26, 2014

4

Overseas Education Ltd Figure 8: Peer comparison Company

Listed in

Overseas Education Ltd

Singapore

Local

Mkt cap

P/E (x)

price*

(USD m)

FY13

FY14E

FY15E

FY13

0.96

295

16.7

15.6

13.5

2.6

2.4

2.2

26.0

27.5

19.3

5.3

3.8

3.2

Sector average

P/BV (x) FY14E

FY15E

Kroton Educacional Sa

Brazil

60.98

7,270

24.8

20.2

15.6

5.3

5.4

4.3

New Oriental Education-Sp

United States

26.29

4,164

19.6

16.2

13.5

4.1

3.2

2.6

Nord Anglia Education Inc

United States

18.52

1,758

n.a.

50.1

27.0

41.5

6.6

5.4

Abril Educacao

Brazil

34.33

1,344

91.5

21.5

16.3

5.2

1.8

1.7

K12 Inc

United States

25.03

990

61.4

29.6

24.0

1.7

1.8

1.8

Nagase Brothers Inc

Japan

3105

309

9.1

n/a

n/a

2.4

n/a

n/a

Eikoh Holdings Inc

Japan

818

175

8.8

n/a

n/a

1.2

n/a

n/a

Nafais Holding

Kuwait

0.08

120

6.2

n/a

n/a

0.6

n/a

n/a

Noah Education Holdings

USA

2.78

102

36.2

n/a

n/a

0.8

n/a

n/a

Mt Educare Ltd

India

110.1

73

19.4

n/a

n/a

n/a

n/a

n/a

Academies Australasia Group

Australia

Hong Kong Education

Hong Kong

China Bilingual Technology & Edu

United States

Ace Edutrend Ltd

India

DMC Education Ltd

India

China Ivy School Inc

United States

Source: Factset, Bloomberg, Maybank KE

1.1

58

12.6

n/a

n/a

2.7

n/a

n/a

0.19

24

n/a

n/a

n/a

0.7

n/a

n/a

0.4

12

1.2

n/a

n/a

n/a

n/a

n/a

34.15

5

21.0

n/a

n/a

2.2

n/a

n/a

1.72

1

n/a

n/a

n/a

0.1

n/a

n/a

0.0226

1

n/a

n/a

n/a

n/a

n/a

n/a

* Prices as at 23 Jun 2014

Figure 9: Peer comparison (continued) Company Overseas Education Ltd

Local

Mkt cap

price*

(USD m)

FY13

FY14E

FY15E

FY13

FY14E

FY15E

FY13

FY14E

FY15E

0.96

295

3.0

3.2

3.7

21.1

15.9

16.9

6.6

10.6

10.1

0.9

0.7

0.9

7.4

14.8

16.9

7.8

14.9

12.7

Sector average

Div yield (%)

ROE (%)

EV/EBITDA (x)

Kroton Educacional Sa

60.98

7,270

0.9

1.1

2.4

21.4

26.9

27.6

n/a

15.9

12.8

New Oriental Education-Sp

26.29

4,164

1.4

0.2

0.4

20.5

19.5

19.2

17.5

10.1

8.5

Nord Anglia Education Inc

18.52

1,758

0.0

0.0

0.0

(34.2)

13.1

20.2

20.5

17.9

15.0

Abril Educacao

34.33

1,344

0.6

2.0

1.8

5.5

8.3

10.3

23.6

23.5

21.2

K12 Inc

25.03

990

0.0

0.0

0.0

1.8

6.2

7.4

7.0

7.3

6.1

3105

309

3.4

n/a

n/a

24.1

n/a

n/a

5.1

n/a

n/a

818

175

3.1

n/a

n/a

13.1

n/a

n/a

2.9

n/a

n/a

0.08

120

0.0

n/a

n/a

10.2

n/a

n/a

12.3

n/a

n/a

Nagase Brothers Inc Eikoh Holdings Inc Nafais Holding Noah Education Holdings Mt Educare Ltd

2.78

102

0.0

n/a

n/a

2.3

n/a

n/a

6.8

n/a

n/a

110.1

73

n/a

n/a

n/a

19.7

n/a

n/a

n/a

n/a

n/a

1.1

58

4.5

n/a

n/a

19.1

n/a

n/a

8.7

n/a

n/a

0.19

24

0.0

n/a

n/a

(18.4)

n/a

n/a

(7.0)

n/a

n/a

Academies Australasia Group Hong Kong Education China Bilingual Technology

0.4

12

0.0

n/a

n/a

23.4

n/a

n/a

n/a

n/a

n/a

34.15

5

0.0

n/a

n/a

7.7

n/a

n/a

8.7

n/a

n/a

DMC Education Ltd

1.72

1

0.0

n/a

n/a

(4.8)

n/a

n/a

(12.2)

n/a

n/a

China Ivy School Inc

0.022 6

1

0.0

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

Ace Edutrend Ltd

Source: Factset, Bloomberg, Maybank KE

June 26, 2014

* Prices as at 23 Jun 2014

5

Overseas Education Ltd

Stronger growth trajectory ahead We expect EPS growth to accelerate from 7.1% in FY14E to 15.5% in FY15E and 16.6% in FY16E following the opening of the new campus in Aug 2015. The main growth drivers are:  A 22% increase in student capacity.  Higher tuition fees made possible by the new campus. The company’s growth in recent years has been held back by:  Space constraints at its old campus.  Below-market tuition fees given its older campus facilities. The two abovementioned issues will be a thing of the past once the new campus commences operations. Figure 10: Stronger revenue growth expected over FY15E-16E

Figure 11: Stronger earnings growth over FY15E-16E

Source: Company, Maybank KE

Source: Company, Maybank KE

Driven by tuition fee hikes and growing new student enrolments as the new campus comes on-stream

Driven by stronger revenue growth that outpaces growth in overhead expenses

New campus the game changer A 22% increase in student capacity. The main impediment to OEL’s growth will be removed once its new 50,000-sq-m campus in Pasir Ris (eastern Singapore) is completed. The construction of the new campus started last October and is expected to be completed in next April, in time for the 2015-16 academic year which starts in Aug 2015. The new campus will increase OEL’s student capacity by 860 students, or a 22% rise, to 4,800 students. The current campus is running at almost full capacity with just under 3,800 students at end-2013. It will also be able to take in another 100 staff members on top of its present contingent of 370 teachers. Figure 12: Growing student enrolments over FY15E-16E

We forecast a 7%/8% rise in student population in FY15E/16E, on an enlarged campus capacity starting from Aug 2015 (%) 5,000 4,363

4,500 4,000

3,554

3,597

3,680

3,776

3,776

3,776

4,581

4,673

4,720

8

4,040 8.0



The optimal capacity utilisation for an international school is 75%.



However, student enrolment is expected to jump 7% in FY15E to 4,040 and 8% to 4,363 in FY16E.

5

2,500

4

2,000 2.3

1,500 1,000

New student intake is expected to remain low until the new campus opens in Aug 2015. The old campus is expected to accommodate 3,776 students in FY14E or 96% of its maximum capacity of 3,940.

6

5.0

3,000



7

7.0

3,500

9

2.6

3

2.0

1.2

1.0

2

500

1

0

0

Student enrolment

YoY growth (RHS)

Source: Company, Maybank KE

June 26, 2014

6

Overseas Education Ltd Higher tuition fees. In addition to more space to take in more students, OEL will also benefit from rising tuition rates. OEL’s average tuition fee of SGD27,117 in FY13 was 15% below the market median of SGD30,329. We expect the new facilities and expanded student capacity to drive a 5.5% pa rise in FY15E-16E, and 3-4% pa thereafter. Other than tuition fees, its student registration fees are also well below market rates. In 2012, OEL doubled its student registration fees from SGD1,000 to SGD2,000 which are still below those of its competitors. Registration fees are charged only once when a new student enrols. Figure 13: Junior and senior tuition fee trends

We forecast tuition fees for both junior and senior schools to be raised by 5.5% pa in FY15E and FY16E, before slowing to 3-4% pa (SGD/year)

(%) 9.0

8.5

40,000 35,000 30,000

6.1

6.6 5.0

25,000

5.5 5.5 4.0

15,000

4.0 4.0 4.0 4.0

3.0

10,000

45,000

7.0

40,000

5.0 4.0

4.0

3.0 3.0

50,000

8.0

6.0

20,000

(SGD/year)

35,000

(%) 9.0

8.0

8.0

7.2

7.0

5.7 5.0

30,000

5.5 5.5

6.0 4.0

25,000 20,000

4.0 4.0 4.0 4.0

4.0

4.0

15,000

5.0

3.0 3.0

3.0

2.0

2.0

10,000

5,000

1.0

5,000

1.0

0

0.0

0

0.0

Junior school fees

Senior school fees

YoY growth (RHS)

YoY growth (RHS)

Source: Company, Maybank KE

Figure 14: Cost of attending the major international schools in Singapore International schools

Tuition fees

Registration & other fees

Singapore American School

SGD19,158-30,154

SGD12,840

United World College of Southeast Asia

SGD27,285-33,744

SGD6,411

Canadian International School

SGD28,519-35,206

SGD4,784

Tanglin Trust School

SGD23,754-39,467

SGD2,675

Australian International School

SGD26,470-37,682

SGD3,160

Stamford American International School

SGD26,528-35,984

SGD3,160

Competitors’ median tuition fees

SGD30,329

Overseas Education Ltd

SGD20,000-37,000 (average SGD27,117)

SGD2,000

Source: Respective schools’ websites

June 26, 2014

7

Overseas Education Ltd Higher revenue growth will offset rise in costs Teaching staff cost: Personnel expenses, mainly teacher salaries, will rise as OEL increases the number of staff with the opening of the new campus in tandem with an expected increase in student population, but we expect growth in revenue to compensate for higher staff costs. In FY13, OEL had 370 teaching staff members (out of a total of 500 staff members). This is equivalent to a 10-to-1 student-to-teacher ratio. To keep this ratio constant, we expect OEL to add 20 teachers pa in FY15E-19E. OEL has always offered competitive pay, including accommodation to its teachers, of which 60% comes from the main English-speaking countries. Figure 15: Revenue growth expected to outweigh staff costs

Revenue expected to grow faster than staff costs in FY15E-16E on improving economies of scale

Figure 16: Student-to-teacher ratio

The ratio is expected to rise in FY15E-17E before trending down as more teachers are hired for the new campus 500

10.6

450

(x) 10.8

10.7

10.5

400 350

10.4

300

10.3

10.4

10.3 10.2

10.5

10.4

10.2

250

10.0

200 150

10.2

9.9

100 50 0

9.6

Number of teachers

Student-to-teacher ratio (RHS)

Source: Company, Maybank KE

Source: Company, Maybank KE

Depreciation & interest cost: Following the completion of the new campus, depreciation and interest cost will also rise in FY15E-19E. Specifically, we expect depreciation charges to rise from 3% of revenue in FY13 to 8.5% by FY16E, while interest cost is expected to rise to almost 6% of revenue by FY16E. OEL is financing SGD150m of the SGD271m new campus with a five-year, 5.2% semi-annual coupon bond due on 17 Apr 2019. However, we expect the higher costs to be offset by the increase in revenue as well as cessation of rental expenses from the old campus, ensuring a stable net margin and stronger earnings growth. Figure 17: Depreciation & interest cost will rise

Depreciation and interest costs will rise the next four years post completion of the new campus

Higher depreciation and interest cost being compensated by the cessation of rental cost for the old campus (as % of revenue) 60.0

(SGD m) 14.0 Depreciation expenses

12.0

11.7

11.8

12.0

12.1

Interest charges

(as % of revenue) 9.0 8.0

50.0

7.0

40.0

10.0 7.6

8.0 6.0

Figure 18: Higher revenue to compensate for rising costs

7.8

7.8

7.8

6.0 5.0

30.0

4.0

20.0 4.5

4.6

4.0

3.9

3.6

2.0 0.0

Source: Company, Maybank KE

June 26, 2014

3.3

3.2

3.3

3.0 2.0

10.0 2.6

1.0

0.0

0.0

Personnel expenses

School lease rental (RHS)

Depreciation expenses (RHS)

Interest expenses (RHS)

Source: Company, Maybank KE

8

Overseas Education Ltd Figure 19: Margins will benefit from bigger campus and higher tuition fees

Gross margin is expected to expand in FY15E-17E on higher tuition fees, while higher depreciation and interest expenses will hold net margin stable (%) 45

Gross margin

40

Net margin

35 30 25 20 15 10 5 -

Source: Company, Maybank KE

June 26, 2014

9

Overseas Education Ltd

SWOT analysis

S

FSS an integral part of FDI

Singapore’s government is highly focused on attracting foreign talent as part of its strategy to achieve economic growth by promoting foreign direct investments (FDI) in Singapore. The ability to attract growing numbers of skilled foreign professionals is an integral part of this strategy as foreigners that come along with FDI must be comfortable with a number of “soft” factors such as a low crime rate, a good living environment and the availability of the same system of education that their children would get at home. As such, FSS plays a major role in attracting foreign talent, as the highly-qualified foreign workers seek to provide the right education for their children. Singapore has achieved a high level of success in providing high quality education for expatriate children. It was ranked second after Germany in the Top 10 Destinations for Raising Children Abroad (Leading Expat Explorer, 2013).

O

Lack of FSS student capacity in Singapore

There were 33 FSS in Singapore in 2013, accommodating 45,800 students. Further, the total number of students in Singapore’s FSS industry is expected to grow at a CAGR of 8% from 42,500 students in Academic Year 2011/2012 t o 58,050 students in Academic 2015-16, according to Frost & S ullivan forecasts. On the other hand, we forecast that the number of seats in FSS schools will increase at a 3.7% CAGR in FY14E-16E, which translates into 47,800, 50,120, and 51,120 student seats in FY14E, FY15E, and FY16E, respectively. As such, we think that the growth in supply is not strong enough to support the demand for FSS. The increase in supply is expected to be lower than the growing demand, and we expect the gap to widen to 1,600 and 3,200 seats in FY14E and FY15E, respectively. This is even after accounting for the following scheduled expansions: 

In Aug 2014, Dulwich and Gems World Academy are slated to open their school campus, adding a total of 1,500 seats by end-2014.



In Aug 2015, OEL will open its new campus in Pasir Ris, adding 860 more seats. Dulwich is expected to expand its capacity further by 1,000 seats in 2015, while United World College of Southeast Asia is also expected to add 460 seats.

O

Qualified and higher-income foreigners still welcome

Since 2007, the non-resident population (ie, people who work, live or study in Singapore on a non-permanent basis) has grown by a CAGR of 7.7% to 28.8% of the total population vs 21.9% in 2007. Amid tighter immigration policies, the pace of growth for this broad segment slowed to 4% in 2013 (2012: +7.2%, 2.11: +6.9%). Among some of the key measures are: 



An increase in the minimum basic monthly pay in Jul 2013 from SGD2,000 to SGD2,200 for mid-level skilled foreigners to qualify for the S Pass work permit), an increase of the minimum basic monthly pay for the Q1 Employment Pass (the next higher category of work permit from S Pass), from SGD3,000 to SGD3,300 in Jan 2014.

June 26, 2014

Figure 20: FSS in Singapore Multi-national curriculum

FSS

with

globally-accepted

Offers at least one internationally recognised curriculum and/or curriculum that can lead to an internationally recognised diploma certificate such as the IB diploma Canadian International School (CIS) Chatsworth International School Eton House International School and Preschool Integrated International School (IIS) ISS International School Singapore (ISS) International Community School (Singapore) One World International School Singapore Nexus International School Stamford American International School United World College of South East Asia (UWCSEA) Gems World Academy (to be opened in Aug 2014) Dulwich College Singapore (to be opened in Aug 2014) Overseas Education Limited Semi-multinational FSS with globally-accepted curriculum Less diverse in terms of the nationality of its student population - provide both globally recognised curriculum as well as country specific curriculum with an international perspective Anglo-Chinese School (International) Singapore Australian International School (AIS) Avondale Grammar School Singapore (AGS) Chinese International School Singapore (CNIS) Dover Court Preparatory School DPS International School Singapore German European School Singapore (GESS) Global Indian International School Singapore Hwa Chong International School (HCIS) Manasseh Meyer School NPS International Singapore American School (SAS) SJI International School (SJII) Tanglin Trust School (TTS) FSS with country-accepted curriculum Targets student population from a specific country background Lycée Français de Singapour The Singapore Japanese School Hollandse School Yuvabharathi International School Swiss School in Singapore (SSS) Singapore Korean International School (SKS) Waseda Shibuya Senior High School Sekolah Indonesia Singapura (SIS) Source: Companies

10

Overseas Education Ltd Notably, tighter immigration policies are targeted at lower-income foreign workers in order to scale back increasing reliance on cheap foreign labour. Qualified foreign professionals are much less impacted. These restrictions do not affect the highest P1 Employment Pass (EP), which is the category of foreigners targeted by FSS. P1 EP holders include senior executives and professionals earning a m onthly salary of at least SGD8,000. The flat growth in the EP number in 2011-13 (Figure 22) was due to the restrictions imposed by the government on lower pay Q1 holders. At end-2013, there were 1.3m foreigners working in Singapore, of which 13.2% or 174,451 were EP holders – a substantial demographic that the FSS can continue to tap into to grow their business. It cannot be d enied that the growth in Singapore’s population has to be driven by foreign workforce, as the citizen population has been almost stagnant (1% YoY growth pa on average since 2007). Singaporeans’ fertility rate is very low. At just 1.2 children per family in 2013, this is way below the required 2.1 children needed to ensure population renewal. In order to sustain economic growth, the government has therefore set the aim of growing Singapore’s population to 6.5-6.9m inhabitants by 2030 from 5.5m today. This target means that the number of foreigners in Singapore will continue to grow. The consolation is that the quality of foreign migrants to Singapore will improve as invariably, they will be more highly paid and qualified, and more likely to enrol their children in international schools. Figure 21: Less inflows of foreigners into Singapore

Due to curbs on cheap foreign labour holding the lowest tier work permit and S Pass ('000)

Due to less approvals for lower Q1 and P2 tiers. However, the highest P1 tier – the target market of international schools – is not affected (%)

(%) 35.0

6,000

180,000

4,000

24.7

25.1

25.7

26.9

28.1

28.8

19.0

15.0

2,000 6.9

2009

2010

Non-resident Citizens Non-resident YoY growth (RHS)

2011

2012

15.0

80,000

10.0

40,000

4.0

5.0

0

2013

PRs Non-resident as % of total pop (RHS)

Source: SingStat

-0.9

20,000

0.0 2008

100,000

60,000

10.0

7.2

4.1

0 2007

20.0

120,000

21.9

4.8

25.0

22.4

140,000

25.0 20.0

1,000

30.0 25.4

160,000

30.0

5,000

3,000

Figure 22: Slower inflows of EP holders

0.7

5.0 0.0 -5.0

Employment Pass

EP YoY growth (RHS)

Source: Ministry of Manpower

Figure 23: Employment permit system in Singapore Permit type

Description

Category

Basic monthly salary

Employment Pass (EP)

Professionals

P1

At least SGD8,000

P2

At least SGD4,500

Q1

At least SGD3,300

S Pass

Mid-level skilled workers

At least SGD2,200

Work Permit

Skilled & semi-skilled workers

Below SGD2,200

Source: Ministry of Manpower

June 26, 2014

11

Overseas Education Ltd

T

Intensifying competition

The top three FSS schools in Singapore are Singapore American School, United World College of South East Asia, and OEL, which runs the Overseas Family School. These three schools together command 37% of the market. OEL is ranked third with about 10% market share, after the Singapore American School (15%) and the United World College of South East Asia (12%). In coming years however, OEL will also face competition from a growing number of other FSS schools. As far back as 2008, many FSS schools were full and the most popular ones had long waiting lists. In response, the Singapore government decided to release land with relatively long 30-year leaseholds and encouraged existing and new FSS players to expand or set up new operations in Singapore. OEL has taken advantage of this scheme, along with new players Dubai-based GEMS Education and Dulwich College, a British independent school. GEMS, the world’s largest operator of private schools, plans to open GEMS World Academy in Sep 2015, while Dulwich also plans to open a campus in Aug 2014, accommodating 400-500 students in the first year. Dulwich was awarded land in Bukit Batok and GEMS in Yishun to build new schools. Figure 24: Major competitors of OEL Singapore American School (SAS)

SAS has more than 3,800 students from more than 50 nations, of which 70% are Americans. SAS has one school campus in Woodlands (north of Singapore) but it is the largest single-campus international school in the world.

United World College of South East Asia (UWCSEA)

UWCSEA has two campuses in Singapore. The Dover campus (in south-west Singapore) has 3,000 students while the East Coast campus, opened in 2008, can take 2,200 students. By 2015, the East Coast campus is expected to be expanded to 2,660 K1 to G12 grade students.

Tanglin Trust School (TTS)

TTS has one campus in Portsdown Road (in south-west Singapore) and 2,700 students. TTS provides UK system education from nursery to the Sixth Form (3-18 years).

Canadian International School (CIS)

CIS has two campuses in Singapore, the Tanjong Katong campus (in eastern Singapore) and the new Lakeside campus (in western Singapore). The Lakeside campus sits on a 43,000 sq meter plot of land, with a maximum capacity of 3,300 students.

Australian International School (AIS)

AIS is owned by the Cognita School Group, a l eading international independent school. It has one campus in Serangoon Gardens (in central Singapore), catering to 2,600 students and 220 teaching staff. 70% of its students are from Australia and New Zealand.

Stamford American International School (SAIS)

Stamford American International School also belongs to the Cognita School Group and can accommodate about 2,500 students in its new campus in Woodleigh Lane (in central Singapore). More than 50 nationalities are represented on their campus.

Source: Maybank KE

O

Regional opportunities beckon

In the medium term, OEL plans to grow its business by leveraging its management expertise and experience in the education industry to tap into the growing demand for international schools in Asia. Indeed, the FSS shortage is not specific to Singapore, as economic troubles in the West have led to many qualified people headed towards Asia to find work, notably Singapore, Hong Kong and China.

June 26, 2014

12

Overseas Education Ltd We note that regional expansion could open up more opportunities for OEL. In Singapore, local students are not allowed to attend FSS schools but there is no such similar restriction for foreign students to attend local schools. In other Asian countries however, this is not the case. For example, in China, it is the local children who fill the majority of places in some FSS schools as increasingly wealthy Chinese parents also seek the best education possible for their children. OEL is eyeing China for future business expansion but this is a medium-term plan. Growing its presence in Singapore is the main focus for now. Figure 25: SWOT Analysis STRENGTHS An international environment of 70 different nationalities that may appeal to foreign parents looking for a culturally diversified environment for their children

WEAKNESSES Presence only in Singapore with no international recognition yet

Pricing power that taps into higher consumption power of wellto-do foreign community

New campus in Pasir Ris is l ess convenient than OEL's current campus on Paterson Road

An excellent reputation in Singapore dating back to 1991 and the quality of the programmes carried by OEL New school campus to be operational from Aug 2015 will increase student capacity by 22% OPPORTUNITIES Singapore's growing FSS industry and the current lack of student capacity that is giving local players strong pricing power

THREATS/RISKS Intensifying competition in Singapore's FSS industry with new players coming in to take advantage of student capacity shortages

Growing FSS industry in Asia that could give OEL room to expand regionally

Risk of losing students due to the less convenient location of the new school campus in Pasir Ris New players entering the Singapore market may drive up cost of teachers in the medium term

Source: Maybank KE

S

Funding for new school campus secured Recently, OEL resolved a key risk that could have severely impacted its plans with its new school campus. That overhang has now been removed.

Costs will rise because of the new campus, primarily interest cost and depreciation charges. OEL’s total investment in its new school campus is SGD271m, comprising the land lease cost of SGD37m and construction cost of SGD234m. OEL funded its new campus with (1) SGD60m of its own reserves, (2) SGD68m in IPO proceeds, (3) and SGD150m from the recent bond issue. Capex for the new campus in FY13 was SGD53m, with another SGD110m expected in FY14E and the final SGD130m in FY15E. From FY16E, the interest cost of the bonds of SGD7.8m pa will be mostly offset by savings in rental cost for the existing campus of SGD7m pa, leaving only incremental depreciation of SGD8.5m for the new campus. However, the long term benefits outweigh the temporary rise in costs as 

OEL will be able to better develop its business with a stable land base for its campus. The land in Pasir Ris has a lease of 30 years, which is far better than the 3 year lease of the existing campus. This will allow it to better plan student enrolment, staff recruitment and facilities.

June 26, 2014

13

Overseas Education Ltd 

OEL will be able to narrow the gap between its current tuition fees, which take into account the fact that it has an older campus, and market rates as the new campus will have new facilities.

W

Location of new campus is further away, which we think is not a concern

When OEL relocates to Pasir Ris, there could be a risk that not all of its students will go with it as it would have lost the advantage of being near to the expatriate catchment areas of Orchard, Bukit Timah and Holland Village. However, OEL’s management was sanguine on this issue, pointing out that: 

all of its main competitors are located away from the city centre. An international school campus requires space to operate its various facilities, hence being located outside of the city centre is quite common. The following popular schools also have campuses located at locations that are further away from the city centre, eg the United World College of South East Asia’s East campus is located at Tampines (north-east Singapore), the Canadian International School’s Lakeside campus is at Jurong West (western Singapore) and the Singapore American School is at Woodlands (northern Singapore). In fact, OEL was the only school to be centrally located near Orchard Road.



Singapore is a relatively small country (only a 20-25 minute drive to Pasir Ris from the city centre). In OEL’s case, the route will actually be easier for parents than the other schools as it will be expressway all the way (via KPE for most of the way and TPE for the last stretch). In addition, since the new campus is located in the east, parents will not be fighting against rush hour traffic when they drop off and pick up their children (usually at 8-9AM and 3-4PM).



A large proportion of OEL’s student population actually stays in the East Coast, Changi and Tampines, the three biggest and nearest suburbs to its new campus. The East Coast in particular is a p opular place for expatriate foreigners to stay.

In addition, management has taken the following measures to assure parents that the new location will not be a problem for them, namely: 

OEL has worked closely with the Land Transport Authority (LTA) to improve road access into its campus (including the construction of a new road) as well as given deep thought to traffic management within its new campus. In fact, SGD20m of the SGD271m investment for the entire campus was for the car park and dropoff/pickup area alone, and the two-basement car park has enough space for 500 cars and 110 school buses. According to management, they want parents to be able to enter and exit within 5-10 minutes as opposed to 1 hour currently at the old campus. If it succeeds, parents could in fact find their travel time (and stress levels) reduced despite the longer distance.



OEL will increase the number of buses from 90 currently to 110 when the new buses open. OEL works with only one bus operator and will work out the right fee structure with the operator to ensure transport costs for parents remain attractive.



The Academic Director, Mr Patrick Keenan, has already started to hold presentations for the students, all the way from kindergarten to senior high schoolers, showing them the facilities of the new school. OEL

June 26, 2014

14

Overseas Education Ltd believes that getting the students excited about the new school is the best way to overcome parental objections to the new location. Lastly, we see the following as se lling points for the school that should help OEL overcome any final objections against the new location. 

We believe parents will find OEL’s admission process and policy to be significantly more flexible than other schools and this will be a major attraction. Unlike the other FSS schools, OEL has no minimum academic admission criteria, no English language proficiency requirement and admissions are open year round with tuition fees prorated. In comparison, applicants to the United World College of South East Asia must either submit prior school reports or pass entry exams and admission interviews, even for kindergarten students. Admission applications are only open once a year and only 22 places are available for most grades each year. It also has a policy that at least one parent must be resident in Singapore for at least 90% of the school term.



OEL’s academic programme attracts a more relaxed parental type as it does not focus excessively on academic grades but favours a balanced approach to education that puts more emphasis on students’ happiness, taking the view that happy students perform better. The grades achieved by OEL students are not the best in Singapore but they are still above the global standard. Supporters will like the school’s multi-cultural diversity as they believe that is the biggest reason for an international school’s existence.



Lastly, even if parents want to switch, they may not be able to as the other international schools are full and still have long waiting lists. As for the new schools, Dulwich will only have 400-500 seats in 2014 with another 1,000 planned for 2015 depending on how they do in 2014, while GEMS is even further away in Yishun without OEL’s easy access.

Figure 26: Locations & capacities of major international schools in Singapore (including schools under construction)

Source: Maybank KE

June 26, 2014

15

Overseas Education Ltd

Appendix 1: Corporate background A reputable name since 1991 OEL was founded in 1991 and has more than 20 years of history as a private education provider operating the Overseas Family School. OEL is one of the top three international schools in Singapore by revenue market share. Its financial track record is important as p arents will want to send their children to established schools that will not close down midway through their education. Overseas Family School was founded by Executive Chairman and CEO David Perry and Executive Director Irene Wong who recognised that there was demand for foreign system education from the expatriate population in Singapore. Today, OEL has about 3,800 students from 70 nationalities. The company was listed in Feb 2013 to raise SGD68m, which was mostly earmarked for the cost of its new school campus in Pasir Ris.

A full range of curricula FSS schools in Singapore can be classified into those who offer a: “Global curriculum” – FSS schools that offer at least one internationally recognized curriculum that lead to an internationally recognized diploma certificate such as the IB diploma.  “Country curriculum” – FSS schools that offer curriculums of a specific country with a targeted student population from a specific country background. OEL offers the K-12 International Baccalaureate (IB) curriculum to children aged 3 to 18 years old. OEL is one of only four schools in Singapore to provide the full spectrum of the International Baccalaureate (IB) programme from the Primary Years Programme (PYP) to the Diploma Programme (DP). The International Baccalaureate organisation is a nonprofit educational foundation headquartered in Geneva, Switzerland that offers four educational programmes for children aged 3-19. In addition, OEL offers The International General Certificate of Secondary Education (IGCSE) examinations and other programmes to supplement these curricula. The IGCSE is equivalent to the UK’s GCSE O-levels (General Certificate of Secondary Education) and prepares students for IB A-level examinations. OEL’s extensive range of programmes ensures that students experience a smooth transition throughout their pre-tertiary education within the IB curriculum. Figure 27: Educational grades offered by OEL Kindergarten

Elementary school

Middle school

Pre-K to K2

Grades 1 to 5

Grades 6 to 8

Primary Years Programme (PYP)

Middle Years Programme (MYP)

High school Grades 9 to 10 (Junior) MYP and IGCSE

Grades 11 to 12 (Senior) Diploma Programme (DP)

Source: Company

June 26, 2014

16

Overseas Education Ltd Operates under strict guidelines OEL seeks to provide the best education to its students. It is authorised by both the International Baccalaureate Organisation and the Cambridge International Examination to offer certificates and education programmes. OEL’s school is also accredited by the Western Association of School & College and regulated by the Council of Private Education (CPE) of Singapore. As such, it is subjected to a full review every six years on a selfstudy basis, in addition to requiring progress updates at the end of every academic year. Figure 28: International educational systems offered by OEL International Baccalaureate (IB)

Founded in 1968, the IB is a non-profit educational foundation that sets worldwide teaching methods. Today, the IB works with 3,800 schools in 147 countries to develop and offer four programmes for students aged 3 t o 19 years old.

Cambridge International Examination (CIE)

The CIE is a non-profit organisation and the world’s largest provider of international education programmes and qualifications for students aged 5 to 19 years old. The CIE is r ecognised by the Office of Qualification and Examinations Regulation (the regulator of examinations in England) to award qualifications.

Source: Various bodies

Figure 29: Accreditation & regulator Western Association of Schools & Colleges accreditation (WASC)

The WASC is an independent non-profit corporation that was formed in 1962 to promote the development of higher education in the Western region of the United States. The WASC is responsible for ensuring and improving the quality and effectiveness of some 170 colleges and universities offering the Baccalaureate Degree and above in California, Hawaii, Guam, the Pacific Basin and several international locations.

Council of Private Education (CPE)

The CPE is a statutory board sanctioned with the legislative power to regulate the private education sector in Singapore. The CPE facilitates development efforts to uplift standards in the local private education industry.

Source: Company

A truly international school OEL has a diversified student population of 70 nationalities. Half are Asian and no one nationality represents more than 20% of its student population. According to management, OEL is the most culturally diversified school in Singapore and the second most diversified school worldwide. OEL believes that the exposure to many different cultures helps students to overcome negative attitudes, which is crucial for healthy development of children. While some expatriate families may choose to send their children to FSS schools comparable to those in their home country to smoothen their children’s transition when they return home, others prefer multi-cultural environment. OEL targets the latter category, whereas most of its main competitors target the first category. For example, the Singapore American School has a st udent population made up of 70-80% Americans while 70% of the Tanglin Trust School’s student population is British. This student diversity allows it to weather through changes in economic conditions in its students’ countries. OEL’s student population was far less diverse in the 1990s, and as a result, revenue was hit when the Asian crisis occurred in 1997-98 as many expatriates from Thailand and Korea (the two major nationalities then) returned to their home countries. In comparison, the 2008-09 financial crisis, which took place when the student population was far more diverse, did not impact OEL at all.

June 26, 2014

17

Overseas Education Ltd

Appendix 2: The new campus Figure 30: Blueprint of new campus at Pasir Ris

New road for OEL’s exclusive use

Two entrances and exits, with Elias Road becoming an exit only at 3-4pm

Source: Company

Figure 31: Artist’s impression of the new campus

Source: Company

June 26, 2014

18

Overseas Education Ltd

Appendix 3: Directors & key management Figure 32: Profile of OEL’s directors & key management executives Year Joined 1991

Experience Co-founder. Responsible for overall business development and strategic planning. Has more than 20 years of experience in the FSS industry.

Other directorships Founder and Chairman of the board of directors of Master Projects. Non-executive director of its two New Zealand subsidiary companies, Centre for Advanced Medicine Limited since 1997, and Feedback Research Limited since 2003. Director of Masters Projects since 1990. Non-executive director of two of OEL’s New Zealand subsidiary companies, Centre for Advanced Medicine Limited since 2002, and Feedback Research Limited since 2003.

Name Mr David Alan Perry

Title Executive Chairman and CEO

Mrs Irene Wong Lok Hiong

Executive Director

1991

Co-founder. CEO of OFS and is responsible for overall business and operations. Has over 35 years of experience in the management of foreign system schools in Singapore.

Mr Ho Yew Mun

Lead Independent Director

2012

Appointed to the Board in Aug 2012.

Independent director of PEC Ltd, a company listed on the Mainboard of the Singapore Exchange. Member of the Singapore Institute of Directors.

Mr Tan Teng Muan

Independent Director

2011

Appointed to the Board in Oct 2011.

Commissioner for Oaths and a partner in the civil and commercial litigation practice of Mallal & Namazie. Advocate and solicitor of Supreme Court of Singapore since 1988.

Mr Leow Wee Kia Clement

Independent Director

2012

Appointed to the Board in Dec 2012.

Mr Patrick William Keenan

Academic Director

1998

Chairs the Academic Board and is the Chairman of the Examination Board and the Head of the Independent Assessment Unit within OFS.

Independent director of JB Foods Limited and Mann Seng Metal International Limited, companies listed on the Mainboard and the Catalist board of the Singapore Exchange, respectively. Partner and head of corporate finance at Partners Capital (Singapore) Pte Ltd. Nil

Mrs Suzanne Madgdalen Bentin

High School Principal

1996

Member of the Academic Board and member of the Executive Board of the School.

Nil

Mr David William Edwards

Middle School Principal

2004

Nil

Mr Jason Lee Chwee Soon

General Manager

1991

Member of the Academic Board and member of the Executive Board of the School. MYP workshop leader and a school moderator for the MYP and an IB school evaluation team member Member of the academic board of City College Singapore. Responsible for the overall organisation and management of administrative matters. Ensures that all operational aspects of the School are running properly.

Mr Aaron Bennett Nussbaum

Elementary School Principal

2006

Member of the Executive Board of the School.

Nil

Mrs Wong Juan Meng

Group Financial Controller

2012

In charge of the overall financial and accounting matters and compliance with financial reporting requirements.

Nil

Mrs Rani Suppia

Kindergarten Principal

1994

Member of the Academic Board and member of the Executive Board of the School.

Nil

Mr Yang Eu Jin

General Counsel

2011

Responsible for advising the Group on all legal and corporate governance matters.

Nil

Nil

Source: Company

June 26, 2014

19

Overseas Education Ltd

Appendix 4: Foreign System Schools in Singapore Figure 33: Foreign System Schools in Singapore Educational levels provided

For children aged

Multi-national FSS with globally recognised curriculum Offers at least one internationally recognised curriculum and/or curriculum that can lead to an internationally recognised diploma certificate such as the IB diploma Canadian International School (CIS)

Preschool - Secondary

3 - 18

Chatsworth International School

Preschool - Secondary

3 - 18

Eton House International School and Preschool

Preschool - Year 6

3 - 11

Integrated International School (IIS)

Preschool - Grade 10

4 - 15

ISS International School Singapore (ISS)

Preschool - Secondary

4 - 18

International Community School (Singapore)

Preschool - Secondary

3 - 18

One World International School Singapore

Preschool - Middle School

3 - 16

Nexus International School

Nursery - Grade 12

3 - 18

Stamford American International School

Preschool - Secondary

2 - 18

United World College of South East Asia (UWCSEA)

K1 - Grade 12

4 - 18

Gems World Academy

Preschool - Grade 12

3 - 18

Dulwich College Singapore (ready by Aug 14)

Preschool - Year 8

2 - 13

Overseas Education Limited (ready by Aug 14)

Preschool - Grade 12

3 - 18

Semi-national FSS with globally-recognised curriculum Less diverse in terms of the nationality of its student population - provide both globally recognised curriculum as well as country specific curriculum with an international perspective Anglo-Chinese School (International) Singapore

Secondary - 'A' level

Australian International School (AIS)

Preschool - Grade 12

12 -18 3 - 18

Avondale Grammar School Singapore (AGS)

Preschool - Middle School

3 - 14

Chinese International School Singapore (CNIS)

Preschool - Grade 12

3 - 18

Dover Court Preparatory School

Preschool - Year 11

3 - 17

DPS International School Singapore

Kindergarten - Grade 12/ 'A' level

2 - 18

German European School Singapore (GESS)

Preschool - Secondary

2 - 18

Global Indian International School Singapore (GIIS)

Preschool - Grade 12/ 'A' level

3 - 18

Hwa Chong International School (HCIS)

Secondary - Grade 12/'A' level

12 - 18

Manasseh Meyer School

Preschool - Grade 8

2 - 14

NPS International

Preschool - Secondary

3 - 18

Singapore American School (SAS)

Preschool - Grade 12

3 - 18

SJI International School (SJI)

Primary - Grade 12

4 - 18

Tanglin Trust School (TTS)

Preschool - Secondary

3 - 18

Kindergarten - Secondary

3 - 18

The Singapore Japanese School

Primary - Secondary

6 - 15

Hollandse School

Grade 1 - Grade 8

4 - 12

Yuvabharathi International School

Preschool - Grade 12

3 - 18

Swiss School in Singapore (SSS)

Preschool - Primary

2 - 12

Singapore Korean International School (SKS)

n/a

Waseda Shibuya Senior High School

Grade 10 - Grade 12

15 - 18

Sekolah Indonesia Singapura (SIS)

Secondary - Grade 12

12 - 18

FSS with country-accepted curriculum Targets student population from a specific country background Lycée Français de Singapour

Source: Companies

June 26, 2014

20

Overseas Education Ltd FYE 31 Dec Key Metrics P/E (reported) (x) Core P/E (x) P/BV (x) P/NTA (x) Net dividend yield (%) FCF yield (%) EV/EBITDA (x) EV/EBIT (x) INCOME STATEMENT (SGD m) Revenue Gross profit EBITDA Depreciation Amortisation EBIT Net interest income /(exp) Associates & JV Exceptionals Other pretax income Pretax profit Income tax Minorities Discontinued operations Reported net profit Core net profit BALANCE SHEET (SGD m) Cash & Short Term Investments Accounts receivable Inventory Property, Plant & Equip (net) Intangible assets Investment in Associates & JVs Other assets Total assets ST interest bearing debt Accounts payable LT interest bearing debt Other liabilities Total Liabilities Shareholders Equity Minority Interest Total shareholder equity

CASH FLOW (SGD m) Pretax profit Depreciation & amortisation Adj net interest (income)/exp Change in working capital Cash taxes paid Other operating cash flow Cash flow from operations Capex Free cash flow Dividends paid Equity raised / (purchased) Change in Debt Other invest/financing cash flow Effect of exch rate changes Net cash flow

June 26, 2014

FY12A

FY13A

FY14E

FY15E

FY16E

12.2 12.2 3.7 na 4.5 9.3 na na

16.7 16.7 2.6 na 3.0 nm 6.6 7.6

15.6 15.6 2.4 na 3.2 nm 10.6 12.1

13.5 13.5 2.2 na 3.7 nm 10.1 12.4

11.6 11.6 2.0 na 4.3 11.0 7.2 9.2

96.0 37.1 28.4 (3.6) (0.7) 24.1 0.2 0.0 0.0 0.2 24.5 (3.8) 0.0 0.0 20.7 20.7

102.5 41.2 30.8 (3.3) (0.7) 26.8 0.4 0.0 0.0 0.1 27.3 (4.7) 0.0 0.0 22.6 22.6

107.2 44.4 32.7 (3.2) (0.7) 28.7 0.3 0.0 0.0 0.2 29.2 (5.0) 0.0 0.0 24.2 24.2

121.4 48.6 44.7 (7.6) (0.7) 36.4 (2.8) 0.0 0.0 0.2 33.7 (5.7) 0.0 0.0 28.0 28.0

138.2 55.3 59.0 (11.7) (0.7) 46.5 (7.4) 0.0 0.0 0.2 39.3 (6.7) 0.0 0.0 32.6 32.6

94.5 1.5 0.6 8.9 3.5 0.0 6.2 115.2 0.0 0.9 0.0 46.9 47.8 67.4 0.0 67.4

124.7 1.5 0.6 58.8 3.2 0.0 5.3 194.1 0.0 0.9 0.0 46.5 47.4 146.7 0.0 146.7

181.7 1.6 0.6 162.6 3.5 0.0 8.2 358.2 0.0 1.0 150.0 48.4 199.4 158.8 0.0 158.8

76.8 1.8 0.6 282.0 3.5 0.0 8.2 372.9 0.0 1.1 150.0 49.1 200.1 172.7 0.0 172.7

102.3 2.0 0.6 273.3 3.5 0.0 8.3 390.0 0.0 1.2 150.0 49.7 200.9 189.1 0.0 189.1

24.5 4.4 (0.0) 0.8 (4.2) 0.1 25.6 (2.2) 23.4 (8.0) 0.0 0.0 (0.6) 0.0 14.8

27.3 4.0 0.1 (0.2) (4.0) 0.0 27.2 (53.2) (26.0) (11.4) 68.0 0.0 (0.4) 0.0 30.2

29.2 3.9 0.0 (2.0) (5.0) 0.0 29.4 (110.0) (80.6) (12.1) 0.0 150.0 (0.3) 0.0 57.0

33.7 8.3 0.0 (0.2) (5.7) 0.0 39.2 (130.0) (90.8) (14.0) 0.0 0.0 0.0 0.0 (104.8)

39.3 12.5 0.0 (0.2) (6.7) 0.0 46.7 (5.0) 41.7 (16.3) 0.0 0.0 0.0 0.0 25.4

21

Overseas Education Ltd FYE 31 Dec Key Ratios Growth ratios (%) Revenue growth EBITDA growth EBIT growth Pretax growth Reported net profit growth Core net profit growth

FY12A

FY13A

FY14E

FY15E

FY16E

8.1 2.9 5.2 4.3 6.1 6.1

6.8 8.2 11.1 11.7 9.5 9.5

4.5 6.1 7.3 6.7 7.1 7.1

13.3 36.9 26.6 15.5 15.5 15.5

13.8 31.9 27.9 16.6 16.6 16.6

Profitability ratios (%) EBITDA margin EBIT margin Pretax profit margin Payout ratio

29.6 25.1 25.5 55.2

30.0 26.1 26.6 50.5

30.5 26.8 27.2 50.0

36.8 29.9 27.7 50.0

42.7 33.7 28.4 50.0

DuPont analysis Net profit margin (%) Revenue/Assets (x) Assets/Equity (x) ROAE (%) ROAA (%)

21.5 0.8 1.7 33.8 19.1

22.1 0.5 1.3 21.1 14.6

22.6 0.3 2.3 15.9 8.8

23.0 0.3 2.2 16.9 7.7

23.6 0.4 2.1 18.0 8.6

Liquidity & Efficiency Cash conversion cycle Days receivable outstanding Days inventory outstanding Days payables outstanding Dividend cover (x) Current ratio (x)

(0.5) 4.9 3.8 9.1 1.8 2.1

3.3 5.3 3.7 5.7 2.0 2.8

3.2 5.1 3.6 5.6 2.0 3.9

2.6 5.0 3.3 5.6 2.0 1.7

2.3 4.9 3.0 5.7 2.0 2.2

2.4 net cash na 0.0 2.3 (94.5)

4.1 net cash na 0.0 51.9 (124.7)

1.8 net cash na 4.6 102.7 (31.7)

1.9 42.4 12.9 3.4 107.0 73.2

1.9 25.2 6.3 2.5 3.6 47.7

Leverage & Expense Analysis Asset/Liability (x) Net debt/equity (%) Net interest cover (x) Debt/EBITDA (x) Capex/revenue (%) Net debt/ (net cash)

June 26, 2014

22

Overseas Education Ltd Research Offices REGIONAL

HONG KONG / CHINA

INDONESIA

WONG Chew Hann, CA Regional Head of Institutional Research (603) 2297 8686 [email protected]

Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional

Wilianto IE Head of Research (62) 21 2557 1125 [email protected] • Strategy

ONG Seng Yeow Regional Head of Retail Research (65) 6432 1453 [email protected]

Alexander LATZER (852) 2268 0647 [email protected] • Metals & Mining - Regional

Rahmi MARINA (62) 21 2557 1128 [email protected] • Banking & Finance

Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer

Aurellia SETIABUDI (62) 21 2953 0785 [email protected] • Property

Alexander GARTHOFF Institutional Product Manager (852) 2268 0638 [email protected]

ECONOMICS Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected] Luz LORENZO Philippines (63) 2 849 8836 [email protected] Tim LEELAHAPHAN Thailand (662) 658 1420 [email protected] JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682 [email protected] Josua PARDEDE Economist / Industry Analyst, BII Indonesia (62) 21 29228888 ext 29695 [email protected]

MALAYSIA WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy • Construction & Infrastructure Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas - Regional • Shipping ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property & REITs

Karen KWAN (852) 2268 0640 [email protected] • Property & REITs Osbert TK TANG, CFA (86) 21 5096 8370 [email protected] • Transport & Industrials Ricky WK NG, CFA (852) 2268 0689 [email protected] • Utilities & Renewable Energy Simon QIAN, CFA (852) 2268 0634 [email protected] • Telecom & Internet Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials - Regional Warren LAU (852) 2268 0644 [email protected] • Technology – Regional William YANG (852) 2268 0675 [email protected] • Technology – Regional

INDIA Jigar SHAH Head of Research (91) 22 6632 2632 [email protected] • Oil & Gas • Automobile • Cement Anubhav GUPTA (91) 22 6623 2605 [email protected] • Metal & Mining • Capital Goods • Property Urmil SHAH (91) 22 6623 2606 [email protected] • Technology • Media

SINGAPORE NG Wee Siang Head of Research (65) 6432 1467 [email protected] • Banking & Finance Gregory YAP (65) 6432 1450 [email protected] • SMID Caps – Regional • Technology & Manufacturing • Telcos • Consumer Wilson LIEW (65) 6432 1454 [email protected] • Property Developers ONG Kian Lin (65) 6432 1470 [email protected] • S-REITs

Anthony YUNUS (62) 21 2557 1136 [email protected] • Consumer • Poultry Isnaputra ISKANDAR (62) 21 2557 1129 [email protected] • Metals & Mining • Cement Pandu ANUGRAH (62) 21 2557 1137 [email protected] • Infrastructure • Construction • Transport Janni ASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail

PHILIPPINES Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy Laura DY-LIACCO (63) 2 849 8840 [email protected] • Utilities • Conglomerates • Telcos Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction Ramon ADVIENTO (63) 2 849 8845 [email protected] • Mining

THAILAND Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer / Materials Jesada TECHAHUSDIN, CFA (66) 2658 6300 ext 1394 [email protected] • Financial Services Kittisorn PRUITIPAT, CFA, FRM (66) 2658 6300 ext 1395 [email protected] • Real Estate

LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove Producers

YEAK Chee Keong, CFA (65) 6432 1460 [email protected] • Offshore & Marine

CHAI Li Shin (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure

Derrick HENG (65) 6432 1446 [email protected] • Transport (Land, Shipping & Aviation)

Ivan YAP (603) 2297 8612 [email protected] • Automotive

WEI Bin (65) 6432 1455 [email protected] • Commodity • Logistics • S-chips

Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected]

LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected]

John CHEONG (65) 6432 1461 [email protected] • Small & Mid Caps • Healthcare

Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]

TRUONG Thanh Hang (65) 6432 1451 [email protected] • Small & Mid Caps

Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy

June 26, 2014

Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector

Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property Woraphon WIROONSRI (66) 2658 6300 ext 1560 [email protected] • Banking & Finance Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap Chatchai JINDARAT (66) 2658 6300 ext 1401 [email protected] • Electronics

VIETNAM LE Hong Lien, ACCA Head of Institutional Research (84) 844 55 58 88 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 844 55 58 88 x 8180 [email protected] • Real Estate • Construction • Materials Le Nguyen Nhat Chuyen (84) 844 55 58 88 x 8082 [email protected] • Oil & Gas NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking NGUYEN Trung Hoa, Dy Head of Retail Research (84) 8 44 555 888 x 8088 [email protected] • Macro • Steel • Real estate TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage

Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy

23

Overseas Education Ltd APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report. This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Singapore This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. Thailand The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result. Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect. US This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

June 26, 2014

24

Overseas Education Ltd DISCLOSURES Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.

Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Singapore: As of 26 June 2014, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report. Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report. Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. As of 26 June 2014, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report. MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Ong Seng Yeow | Executive Director, Maybank Kim Eng Research

Definition of Ratings Maybank Kim Eng Research uses the following rating system BUY Return is expected to be above 10% in the next 12 months (excluding dividends) HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends) SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

June 26, 2014

25

Overseas Education Ltd  Malaysia Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194 Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603) 2282 5136

 Philippines Maybank ATR Kim Eng Securities Inc. 17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738

 Singapore

Maybank Kim Eng Securities (London) Ltd 5th Floor, Aldermary House 10-15 Queen Street London EC4N 1TX, UK

Tel: (65) 6336 9090 Fax: (65) 6339 6003

Tel: (44) 20 7332 0221 Fax: (44) 20 7332 0302

 Hong Kong

Kevin FOY [email protected] Tel: (65) 6336-5157 US Toll Free: 1-866-406-7447

 Indonesia

 New York Maybank Kim Eng Securities USA Inc 777 Third Avenue, 21st Floor New York, NY 10017, U.S.A. Tel: (212) 688 8886 Fax: (212) 688 3500

 India

Kim Eng Securities (HK) Ltd Level 30, Three Pacific Place, 1 Queen’s Road East, Hong Kong

PT Maybank Kim Eng Securities Plaza Bapindo Citibank Tower 17th Floor Jl Jend. Sudirman Kav. 54-55 Jakarta 12190, Indonesia

Kim Eng Securities India Pvt Ltd 2nd Floor, The International 16, Maharishi Karve Road, Churchgate Station, Mumbai City - 400 020, India

Tel: (852) 2268 0800 Fax: (852) 2877 0104

Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189

Tel: (91).22.6623.2600 Fax: (91).22.6623.2604

 Thailand Maybank Kim Eng Securities (Thailand) Public Company Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama 1 Road Pathumwan, Bangkok 10330, Thailand Tel: (66) 2 658 6817 (sales) Tel: (66) 2 658 6801 (research)

 South Asia Sales Trading

 London

Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Research Pte Ltd 9 Temasek Boulevard #39-00 Suntec Tower 2 Singapore 038989

 Vietnam Maybank Kim Eng Securities Limited 4A-15+16 Floor Vincom Center Dong Khoi, 72 Le Thanh Ton St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 844 555 888 Fax : (84) 8 38 271 030

 Saudi Arabia In association with

Anfaal Capital Villa 47, Tujjar Jeddah Prince Mohammed bin Abdulaziz Street P.O. Box 126575 Jeddah 21352 Tel: (966) 2 6068686 Fax: (966) 26068787

 North Asia Sales Trading Alex TSUN [email protected] Tel: (852) 2268 0228 US Toll Free: 1 877 837 7635

www.maybank-ke.com | www.maybank-keresearch.com

June 26, 2014

26